By Dr. J.B. Penn
WASHINGTON, June 30, 2014 - Facilitating global trade in food and agriculture products over the next four decades will be critical to achieve major improvements in global food security. More open markets, better marketing infrastructure and stronger trade policies, along with accelerated productivity are fundamental to the necessary growth in agriculture and its value chain.
Yet, it has become politically attractive to demonize trade liberalization in much of the world, almost like it was in the heyday of central planning when "self-sufficiency" and the protectionism it implies isolated many developing countries. Once again, renewed efforts to expand and reinforce global trade are essential to build food and nutrition security in the years ahead as regional demand-supply imbalances become more acute with isolation, and prices become more volatile.
The global food and nutrition security challenge
This food and nutrition security challenge is complicated by many factors.
Population growth. The globe's population growth is following an “S curve” over time. Peak numbers now are forecast for around the middle of this century with stabilization at somewhere between 9.5 and 10 billion people, according to the United Nations.
Growing affluence. As population numbers grow beyond the just over 7 billion people today, more and better food will be required. But, that amount expands as incomes grow reflecting poverty reduction from development, a trend that enables large groups to continue improving their diets—consuming both more calories and a wider variety of foods. Shifts from staple foods to diets with more animal products require even more commodities. This combination of population growth and rising affluence means production requirements by 2050 will be 70 percent or more greater than they are today.
Resource constraints. To the surprise of some experts, the global agricultural plant has demonstrated that it can expand to meet demand growth. Still, the agricultural resource base now appears to be almost fully exploited—with very little highly productive land remaining to be cultivated while that which can be used requires considerable capital investment. In addition, perhaps 70 percent of available freshwater already is used for irrigation. Continued economic growth across the developing world along with urbanization can only intensify the competition among urban, industrial and agricultural uses for the available water. With few more resources to exploit, the solution clearly is innovation; finding new ways to enhance productivity of the existing resource base.
Rising urbanization. The vast, steady movement of rural people to cities is quite subtle in its impacts but it changes the global food security picture nevertheless. By 2010, 50 percent of the world population already lived in cities, a share that will grow to 70 percent by 2050, demographers say. In many countries, the urbanization process is even faster— Brazil has already surpassed 80 percent and China will reach 70 percent well before 2050. And, we all have seen the projections of the number of megacities that will exist by 2030. The result is that the world’s billions are increasingly concentrated in population centers, generally far from food production areas.
The critical role of trade
Since 2000, trade in grains has reached 13 percent of annual consumption. With the global economic boom early in the new century boosting millions of people moving into the middle class, food and agriculture trade has expanded. Today, forecasters expect this proportion to continue to grow. Liberalizing that trade will be increasingly important, in fact critical, to achieving global food security.
In food security discussions today, most attention still is focused on land availability, plant and animal genetics, mechanization, and improved farming methods. But, even after accelerating productivity and increasing production, the greater amounts of food still must move (affordably and sustainably) to consumers in large population centers.
A few major food-surplus exporting areas will play a central role in helping to close food-deficit gaps. These include:
· South America (notably Brazil and Argentina)
· North America (Canada and United States)
· The Black Sea Region (Ukraine, Russia and Kazakhstan)
Today, these three regions together supply 62 percent of the global grain exports and account for 73 percent of the total value of trade in food and agricultural product exports.
The great irony
Yet, protectionism is on the rise, rather than declining, and it is levying increasing tolls on the availability and cost of food. Multilateral efforts, such as the Doha Round, to liberalize trade have failed in no small part due to the recalcitrance of both agricultural producers and food consumers to reduce subsidies and open markets.
In late 2008, anticipating the onset of a global economic downturn, the G-20 group of nations pledged not to exacerbate it with new protectionist measures. That turns out to have been a futile hope and more than 1,500 such measures have been implemented since then, many affecting food and agriculture trade directly. These include export embargoes and taxes, tariffs and other duties and selected, arbitrary sanitary and phytosanitary measures that lack any basis in science. There are many others.
Still, there are some glimmers of hope for significant progress in the future. Major negotiations are underway today by several nations for regional free trade agreements. These include twelve Pacific nations attempting to create the Trans-Pacific Partnership, a pact for enhanced trade and investment which also prominently addresses food and agriculture issues. Also, the European Union and the United States are engaged in an enormous undertaking to form the Trans-Atlantic Trade and Investment Partnership. These negotiations also address food and agriculture trade and extend well beyond economic hurdles to regulatory, standards, safety and other such barriers.
Successful conclusion of these “21st Century” agreements would represent progress, but significant potential trade flows among many nations still would not be included. More robust and encompassing multilateral and other broad efforts specifically addressing food trade will be essential to attaining a meaningful level of global food and nutrition security in the years ahead. Future food needs will strain our systems, but can be met if the global community recognizes the critical role of international trade in meeting growing demand.
About the author: Dr. J. B. Penn is the chief economist of Deere & Company. His office helps guide the company’s policy development and corporate growth initiatives worldwide, through the analysis of global trends in economics, business conditions, and governmental policies. Prior to joining Deere, Penn served as under secretary for farm and foreign agricultural services for the U.S. Department of Agriculture after developing an extensive career in the private sector. He currently serves on the DuPont Advisory Committee on Agricultural Innovation and Productivity which explores the global issues affecting food and nutrition security.
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